Australian Economic News

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Aussie corporates look to European debt market

PRASHANT MEHRA AND MAGGIE LU YUEYANG THE AUSTRALIAN SEPTEMBER 11, 2014 12:00AM

MORE local companies are expected to turn to the European debt markets over coming months, attracted by the prospect of raising big-ticket, longer-term funds as investor appetite remains weak at home.

A low interest rate regime in Europe has also helped. Last week, the European Central Bank slashed its main lending rate to a record low of 0.05 per cent in response to a sagging eurozone economy.

“Investor appetite offshore remains very strong. We are going to see more issues between now and December,” said Anita O’Brien, director of capital markets and treasury solutions at Deutsche Bank.

“I suspect we will see a bit of a rush,” said Michael McCarthy, chief market strategist at CMC Markets.

“There are a lot of Australian companies needing funds in the five to 10-year maturity range,” he added.

On Tuesday, toll roads operator Transurban said it would raise €600m in 10-year notes, while Origin priced a €1bn issue of hybrid securities.

A number of non-financial corporate borrowers have already made their way to Europe, including Scentre, Brambles and AusNet Services.

“The ECB’s decision last week just confirms that rates are going to be lower for longer in that part of the world,” said Barry Sharkey, co-head of capital markets at UBS, which acted as the structuring adviser for the Origin deal.

European markets operate under a different documentation regime to that in the US and the execution and legal requirements are more flexible.

So even though euro-denominated debt is not always the cheapest option for Australian companies — because of the tendency to swap the debt to Aussie dollars — many corporates prefer to raise in European markets because it is more convenient.

The rush for bond raisings offshore has not translated into bigger appetite in the local corporate bond market, which remains chronically undersupplied by domestic borrowers.

Industry experts say change is expected to be slow, given the lack of access to capital and investor preference for instruments of up to five-year maturity.

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Australia’s luck starting to run out says Peter Costello
AAP SEPTEMBER 17, 2014 12:18PM
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Costello: Australia’s luck ‘running out’
Former treasurer Peter Costello says Australia’s luck is starting to run out. Source: News Corp Australia
PETER Costello has warned the country’s luck is beginning to run out as wages fall and consumer pessimism grows.

Australia’s longest serving treasurer said that while Australia is “far” from recession, the economy was undergoing big changes, leaving people with a sense of uncertainty about the future.

“(Australia’s) luck’s beginning to run out,” he told a property forum in Sydney on Wednesday.

“For the first time since the 1990s, per capita incomes have stabilised in Australia — they are no longer growing.

“Young people under 50 who have lived through a period of uninterrupted rising incomes are beginning to experience something that’s different.” Consumers were “anxious” and had “stopped spending”.

Real wages were falling and disposable incomes had “peaked”, Mr Costello said.

The former Liberal treasurer pointed out that the household savings ratio was now 10 per cent, compared with the booming 1990s when people were spending all of their wealth.

“People have closed the credit card and opened a bank account,” he said.

Mr Costello said while there would be a future for manufacturing in Australia, the industry would no longer be a “mass employer” of local workers.

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Stuck in the middle

Mark Mulligan and Vesna Poljak
1645 words
20 Sep 2014
The Australian Financial Review
AFNR
English
Copyright 2014. Fairfax Media Management Pty Limited.
Tipping point Global markets are realigning, complicating the outlook for Australia, writes Mark Mulligan.

Like most overhyped New Year's Eve celebrations, this week's monetary policy statement by the US Federal Reserve went down not with a bang but a whimper.

It was the last chance for the central bank of the world's largest economy to spell out what it plans to do about interest rates before it winds up six years of extreme monetary expansion, yet it was universally seen as a non-event. And that was the point. The last time the Fed was too explicit tapering off a five-year bond-buying program aimed at pushing cheap credit into the real economy – known as quantitative easing – investors dumped emerging market assets en masse, driving down currencies and opening up current account deficits from Istanbul to Sao Paulo.

Known as the "temper tantrums", they stemmed from investor panic at the thought of a rapid transition from near-zero per cent interest rates in the US to a series of rate increases that would quickly reassert the greenback as the reserve currency of choice.

In the event, this is now happening, but at a more measured pace and with cautious Fed language designed to avoid global financial shocks.

"We're clearly now at the start of a US dollar bull market, which will last for a number of quarters, maybe years," says BT Investment Management's head of income and fixed interest Vimal Gor.

"And that's beneficial to all of the rest of the world's central banks, because they all want to devalue their currency."

This is never so true as in Australia, where exporters and import-exposed companies have been labouring under the price and competition pressures of a relatively high local currency for years. This was bearable when booming mining infrastructure investment and high commodity prices were driving the economy, but has become a drag since the end of the bonanza.

Sharply declining prices for iron ore and coal, which together account for about a third of Australia's export revenues, have eroded the country's terms of trade and national income, which means lower real spending power for households, governments and businesses. Effect on unemployment

This is weighing on consumer sentiment and spending, and holding back business investment which, in turn, means Australia's unemployment rate is likely to stay above 6 per cent for the foreseeable future.

"If you go outside mining exports and housing, it's still a bit hard to find some durable, consistent signs of things improving," says JPMorgan's chief economist Stephen Walters.

The fall of the Aussie dollar against the greenback in recent weeks – on a mix of softening commodity prices, jitters about the Chinese economy and expectations of new Fed language – will provide some relief if sustained, particularly to farmers, agribusinesses, manufacturers and services exporters such as tourism and higher education operators. Australia is caught in a pincer movement of two giant economies. On one hand the US is anticipating growth, as seen in the statements though not yet the actions of the Fed. On the other hand China is battling an economy in contraction.

As the RBA navigates these conflicting pressures, the currency's decline, to new six-month lows, also takes off some pressure. The bank has had the cash rate at a record low 2.5 per cent for more than a year and it's reluctant to ease monetary policy any further, despite concerns about the slow pace of Australia's economic diversification and the jitters about China.

The RBA's conundrum is made more complex by the risks of inflating a property bubble through even lower interest rates. In the minutes of the last RBA policy meeting, governor Glenn Stevens singled out mortgage credit and house price growth for special mention. China is by far Australia's biggest export market, with its demand for coal, iron ore and other natural resources a huge factor in global commodity prices. After years of high single-digit and low double-digit growth rates, the world's most populous country is now trying to manage an orderly transition to a more sustainable economic model.

This is making it easier for foreign investors to enter its capital markets and trade the yuan. Pimco managing director and portfolio manager Saumil H. Parikh has his doubts about the process.Cooling economy

"The current Chinese growth model of public sector directed investment and financial repression leading to a real estate boom is slowly but surely running out of steam," he says. As China tries to manage a cooling economy without unleashing domestic and global chaos, so the US Fed is carefully stage-managing its recovery the from the dark days of the global financial crisis.

China this week eased monetary policy in two separate operations, in a bid to prop up its slowing economy and counter a sharp fall in the property market.

The People's Bank of China cut the 14-day repurchase rate, which directly affects the cost of borrowing, by 20 basis points to 3.5 per cent, after moving on Wednesday to inject 500 billion yuan ($90 billion) into the banking system via short-term loans.

The rate cut came as data showed property prices tumbled across China's largest cities. These wobbles could put further pressure on commodity prices, which could hurt Australia.

"The global economic and financial backdrop is changing," says Citi's chief economist Paul Brennan in a note. "In particular, the slowdown in China is sharper than expected, but in contrast, the continued robust expansion in the US is leading the [Fed] to lift its guidance on interest rates."

US economic growth is running at about 4 per cent, meaning that, despite some patchiness in the labour market and weak wage growth, the Fed will soon need to start lifting interest rates to put a lid on inflationary pressures.

"The Fed is going to be moving to a more pronounced tightening phase in the near term," says Perpetual's head of investment markets research Matt Sherwood. Although it was cautious with its language, members of the Fed's Open Market Committee were more explicit about the pace of tightening: their bets on where US interest rates would be at the end of next year rose from 1.125 per cent to 1.375 per cent last time.Australia's place

Where Australia fits into this new world, in which the US and China are moving in different directions – while other big global players such as Europe and Japan are battling to keep economic stagnation and deflation at bay – is open to debate.

"Strong and sustained US growth historically is positive for Australia, but China's slowdown is dragging down Australia's national income," Citi's Paul Brennan says.

If early indications are a guide to the medium term, the impact of this new global dynamic on Australia's financial markets will be mixed. Despite immediately adding to recent falls with a sharp decline on the Fed's interest rate guidance on Thursday, the Australian dollar has since recovered to what many see as its new comfort level around US90¢.

Even the most bearish forecasters say the currency is unlikely to be below US88¢ at the end of this year, mainly because of the ­continued differential between Australian interest rates in those in the rest of the ­Western world.

Australian shares, too, have come under selling pressure of late, with the benchmark S&P/ASX 200 ending seven of the last 10 sessions down. "The smart money is already starting to deal with the new world," says Perpetual's Sherwood.

This is never truer than in the case of Australia's so-called "yield stocks", such as banks, utilities, consumer staples and listed real estate investment trusts, says JPMorgan equity strategist Paul Brunker. He puts about half the Australian sharemarket's capitalisation into this category.

"We've had a rather strange bull market, if you like, in the last three years, which has just been led by boring stocks which ­normally under-perform a rising market," he says. "Our view on that 50 per cent of the ­market is that it will lag from here, but not dramatically.

"The reason we think it will lag is improving economic growth in the US, which will lead to a yield pull . . . and that just takes some of the edge off a few of these sectors."

Many of these companies also face regulatory, macro-economic and competition headwinds, he adds.

"The tendency to treat these stock as bonds is questioned by what will happen to bonds, but also earnings – not that there's so much a huge downside, but there are question marks over upside," Brunker says.Commodity prices

The future direction of commodity prices, meanwhile, is less clear. Despite sharp falls this year, including a 30 per cent decline in price of iron ore, few economists are prepared to call the death of the so-called commodities super cycle. A shake-out of the least efficient iron ore producers should eventually help lift prices, while even tough new Chinese import bans on coal with high ash and sulphur content could eventually benefit Australia's producers, according to some industry representatives.

What Australian exporters are losing in price, they are partially making up through the greater volumes flowing from the additional capacity installed during the mining investment boom.

Citi's Paul Brennan is upbeat about Australia's long-term economic prospects, saying corporate cost-cutting and a strengthening US economy will benefit the country, despite faltering demand from China.

"While the slowdown in China is lowering commodity prices, the impact of lower commodity prices on mining investment is only gradually affecting Australia's real GDP growth," he says.


Fairfax Media Management Pty Limited

Document AFNR000020140919ea9k0001r

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Too one-sided as weaker A$ will bring about a revival of export based industries and domestic industries that caters to foreigners such as tourism and education...

$A to dive as growth skids, tips Roubini
PUBLISHED: 0 HOUR 5 MINUTES AGO | UPDATE: 0 HOUR 0 MINUTES AGO


The Australian dollar is likely to weaken to below US75¢ - a fall of around 20 per cent, forecasts Roubini’s local analyst David Nowakowski.
MARK MULLIGAN
The slowdown in China and fiscal tightening will drive Australia’s growth as low as 2 per cent next year, allowing interest rate cuts and a 20 per cent devaluation in the local currency, according to a prestigious global forecaster.

Roubini Global Economics, founded by renowned US economist and doomsayer Nouriel Roubini, says slowing Chinese growth will hit commodity prices and Australian export volumes, while domestic consumer and investment weakness will continue to drag on the country’s gross domestic product.

Describing the federal government’s fiscal austerity as “poorly timed”, it sees GDP growth slowing from just below 3 per cent now to 2 per cent for 2015 after ending this year at 2.8 per cent.

The outlook is by far the most downbeat so far published on Australia and contrasts with an almost consensus view that the economy, although not robust, is in fairly good shape and should improve throughout next year.

MOST DOWNBEAT SO FAR
At the same time, however, a growing number of economists have begun qualifying their more upbeat view of Australia with warnings about the magnitude of China’s credit and property market problems.

“Domestically, mining output is still strong, but investment in the sector is not, and iron ore prices are plummeting,” wrote Roubini’s local analyst David Nowakowski.

“Although some easing of China’s credit crunch will help Australian exports in the short run, we see lower Chinese growth in 2015 as a headwind that will weaken Australia’s growth and inflation next year, and weigh on growth-orientated assets such as equities and the Australian dollar.”

Mr Nowakowski said flagging growth and low inflation would create room for the Reserve Bank of Australia to make a “cut or two in interest rates, to 2 per cent”.

This would help drive the Australian dollar down as the US Federal Reserve started to lift interest rates, he said.

“The Australian dollar is likely to weaken to below US75¢ - a fall of around 20 per cent - on a combination of the lower interest rate differential and slumping GDP growth, with commodity price effects outweighing volumes,” he said.

The local unit was fetching about US89.50¢ in early afternoon trade on Monday, up slightly on the day. After recovering slightly throughout last week, the price of iron more settled down again on Friday at a new five-year low of $US81.70 a tonne.

The bearish Roubini report also identifies Australia’s housing boom as “increasingly out of line with fundamentals”, including demand for goods and services and the unemployment rate.

The Australian Financial Review

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Housing approval dip to hurt growth
THE AUSTRALIAN SEPTEMBER 23, 2014 12:00AM

Kylar Loussikian

Journalist
Sydney
LOWER housing approvals will “cast a shadow on the economy’s transition away from resource-led growth,” with analysis prepared by financial services firm JPMorgan showing an 8 per cent decline in approval numbers between January and July this year.

High-density developments have had the biggest declines in approvals, falling 15 per cent since the start of the year. The residential construction sector has been one of the best-performing sectors of the Australian economy, and the analysis noted that new dwelling investment had risen 15 per cent for the first half of the year.

“Despite comprising only 5 per cent of Australia’s GDP, residential investment contributed 0.3 per cent to real GDP growth in (the first half of the year), the strongest outcome since the property boom of the early 2000s,” the researchers wrote. But investment in construction closely follows building approvals. The JPMorgan analysis found that if the July data was extrapolated for the reminder of the quarter ending September, “residential investment will not contribute to second-half real GDP growth.”

GDP growth would be somewhat protected by the fact approvals have mainly fallen for high-density projects, not single-family homes, which have a much larger impact on residential investment. For every 1 per cent quarter-on-quarter rise in single family dwellings, residential investment rises by 0.4 per cent, while an identical gain in high-density approvals sees a lift of just 0.1 per cent, JPMorgan researchers wrote.

Over the long-term, housing supply is forecast to remain below population growth, which alongside record low interest rates, will continue to put pressure on prices.

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Jobs cut as commodity prices keep tumbling
THE AUSTRALIAN SEPTEMBER 25, 2014 12:00AM

Sarah-Jane Tasker

Reporter
Sydney
MORE than 20,000 jobs have been cut from Australia’s mining sector in just three months as commodity prices decline and fears about China weakening take hold.

BGC Contracting is the latest to axe jobs as the prices of Australia’s top two exports, iron ore and coal, sit at record lows.

The contractor is said to have cut about 50 jobs from Atlas Iron’s Wodgina iron ore mine in Western Australia and a handful of positions at Cliffs Natural Resources’ Koolyanobbing iron ore mine. The company would not comment on the cuts yesterday.

The Australian also understands Fortescue Metals Group and Atlas Iron have both cut positions in the past couple of weeks.

The latest job losses came as the government’s resources forecaster lowered its forecast for the iron ore price, which has dipped below $US80 a tonne, on fears of oversupply and weakened Chinese demand.

The Bureau of Resources and Energy Economics now expects the iron ore price to average about $US94 a tonne for the rest of this year, significantly lower than the $US107 a tonne forecast offered in June.

Slumping iron ore and coal prices have forced miners to continue cutting costs, which has been the focus of the sector over the past year to address weakening margins in a low-price environment.

BHP Billiton, the world’s largest miner, this week announced 700 job cuts from its Queensland coking coal mines, saying the aim was to cut costs and remain viable for the long term. Those job cuts came on the back of 1000 job losses announced on Monday from the minerals division of the laboratory testing group ALS.

Employment in the minerals sector has dropped 11 per cent from 237,000 people in May to 212,200 in August. The cuts have mostly been in the metal ore mining and coal sectors. The number of job losses represents about 10 per cent of the sector’s total workforce, meaning one in 10 people have lost their job.

Manpower Group managing director Lincoln Crawley said the job losses were likely to continue.

“We are going to see more large organisations reducing their staff numbers as they try to drive the productivity targets in light of low commodity prices,” he said.

The recruiter and workforce consultant’s latest quarterly outlook report on employment had the resources sector at +7 per cent.

Mr Crawley said it was the large organisations that were looking to lay off staff.

“For the large organisations there is no growth at all. There is likely to be a reduction,” he said.

Mr Crawley said research by Manpower subsidiary Right Management showed that the resources sector had a higher number of axed employees leave the industry than any other sector in Australia.

“(Mining) employees understand the volatility of the market at the moment,” he said. “There are fundamental shifts in our economy and large numbers of people are impacted.”

Job cuts are having a positive effect on US coal giant Peabody Energy, which has upgraded its earnings forecast on the back of successful cost-cutting measures.

The company has slashed its Australian workforce by more than 20 per cent this year.

“Our operations are performing well as we experienced higher-than-expected results from the western United States, improved performance from Australian metallurgical coalmines and continued cost reductions across the platform,” Peabody chairman and chief executive Greg Boyce said.

Some analysts have predicted that the price of metallurgical coal, used in steelmaking, has reached the bottom, but the volatile iron ore price has them guessing. Iron ore slumped to a five-year low this week of $US79.40 a tonne but could improve today after a rise lift in Chinese iron ore futures.

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"Going concern" warnings for one in three companies listed in Australia's exchange. Sounds bad to me.

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Surge in auditor warnings for ASX-listed companies
September 24, 2014
Gareth Hutchens and Adele Ferguson

The number of Australian companies receiving warnings from auditors about their financial health has jumped to a higher level than that seen during the global financial crisis, new research shows.
Auditors last year flagged issued "going concern" warnings to one in three companies listed on the Australian Securities Exchange, an analysis of eight years worth of company reports from CPA Australia reveals. By comparison roughly one in five companies received similar warnings during the height of the GFC.
[...]

http://www.smh.com.au/business/markets/s...0kpfr.html

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US, Britain at fore as foreign investment rises 11.3pc
THE AUSTRALIAN OCTOBER 02, 2014 12:00AM

Rowan Callick

Asia Pacific Editor
Melbourne
FOREIGN investment in Australia climbed 11.3 per cent in 2013, contributing to a total stock that has reached $2.5 trillion, according to figures released yesterday by the Department of Foreign ­Affairs and Trade.

In return, Australia’s investment overseas — including both direct and portfolio holdings — stands at $1.6 trillion.

About a quarter of foreign holdings in Australia — $630 billion — is in direct investment. In 2013, the US contributed $35bn in direct investment, Singapore $14bn, Britain $12bn and Japan $10bn.

The US and Britain also hold the largest overall stock in Australia, almost half the total, and are the top destinations for Australian investment going overseas — almost 45 per cent.

China’s contribution is growing, with its direct investment reaching $5bn last year, 43 per cent up on 2012.

It is now Australia’s sixth-­largest source of direct investment — $21bn — and the eighth-largest investor overall, including portfolio money — $32bn.

Trade and Investment Minister Andrew Robb said Australia had “a very compelling story to tell, having seen 23 years of uninterrupted growth and with the Abbott government pursuing an aggressive pro-investment policy agenda aimed at further enhancing our reputation”.

Mr Robb pointed to removing the carbon and mining taxes, cutting red and green tape, streamlining project approvals and increasing infrastructure spending as key elements of the agenda. However, the Abbott government took office as direct investment in both directions was slumping.

Direct investment into Australia fell 5.3 per cent in 2013 compared with the year before.

And Australian direct investment abroad also sank in 2013, by 4.1 per cent, while portfolio flows from Australia fell even further, by 22.1 per cent.

The big upswing comprised foreign portfolio investment in Australia, which soared by 47.1 per cent.

The top 10 destinations for direct Australian investment in 2013 were, in descending order, the US, Britain, New Zealand, Canada, Papua New Guinea, Germany, Indonesia, Singapore, Brazil and Bermuda.

The top 10 sources of direct investment were, in order again, the US, Britain, Japan, Holland, Singapore, China, the British Virgin Islands, Switzerland, Canada and Germany.

Australia ranks 14th in global targets for foreign direct investment — compared with 10th a decade ago, and eighth 20 years ago.

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Miners go gangbusters despite China chill
THE AUSTRALIAN OCTOBER 03, 2014 12:00AM

David Uren

Economics Editor
Canberra
The softening of China’s economy shows no signs of affecting Australia’s performance, with iron ore exports running at close to ­record levels and coal shipments not far behind.

Australia is still running substantial trade deficits, partly reflecting the imports of equipment for the new LNG projects, however it is expected to return to surplus once those projects are complete and start shipments.

Trade figures for August show a reduced deficit of $785 million, down from $1.1 billion the previous month. Both exports and imports dipped. However, the trade report shows that the key Chinese market, which takes 36 per cent of Australia’s exports, is still showing strong growth, with sales over the past 12 months up by 19.1 per cent.

Australia’s top-10 export markets, with the exception of India, are growing as the completion of resource projects boosts Australia’s export capacity. Although exports dipped slightly in August, over the past 12 months sales to Japan were up 4.3 per cent, to Korea up 7.1 per cent and to the US up by 15.3 per cent. India has been the only soft market, with sales dropping by 23.2 per cent.

The trade figures show that the slump in iron ore prices is yet to start affecting exports. Barclays chief economist, Kieran ­Davies, noted that the export price was still $US92 a tonne, whereas the current spot price was $US78.

LNG exports were down slightly in August but were 18 per cent higher than a year ago. “These exports should surge as production begins at one of the major gas projects in Queensland due for completion by the end of this year,” ­Mr Davies said.

Imports of capital goods lifted in the month but were 8 per cent lower than they were a year ago. Imports of plant for resource projects were expected to fall sharply over the next year.

A note from ANZ’s economics team predicts that trade deficits will deepen over coming months. However, a return to surplus is expected from the middle of next year.

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Joe Hockey seeks foreign funds for assets
THE AUSTRALIAN OCTOBER 06, 2014 12:00AM

POWERFUL investors are being urged to turn their sights on Australian asset sales and infrastructure projects in a bid by Joe Hockey to attract more foreign investment from Wall Street.

Chief executives from Citigroup, Morgan Stanley and JPMorgan Chase & Company will meet the Treasurer in New York in the next two days to canvass ­potential deals and discuss a global push to increase private support for public projects.

Bank of America Merrill Lynch is also hosting Mr Hockey at an investor roundtable lunch at its headquarters, where fund managers will question the Treasurer on his attempts to lure more cash for infrastructure.

Mr Hockey has arrived in New York for two days of meetings before heading to Washington DC for a gathering of finance ministers from the world’s 20 biggest economies.

Central to his message is an “asset recycling initiative” that ­offers state governments a 15 per cent bonus payment for the money they put into new infrastructure projects from the proceeds of selling old assets.

Mr Hockey said he wanted his visit to New York to encourage more US funds to explore the privatisations and infrastructure projects in Australia that could flow from the asset recycling program.

“The fact is there is an obvious gap between where the private sector is at, globally, and where governments are at,” he told The Australian.

“The private sector has huge capital reserves. The question is what is going to unleash the private sector in Australia and globally. It is a question of stalled ambition in the global marketplace at the moment. So how do we fire up the private sector? That’s what I’m focused on in New York.”

Queensland is proposing to pri­vatise Powerlink, Energex and Ergon Energy while NSW has sold three major ports, but the federal government wants other states to make similar commitments. South Australia is proceeding with the sale of its motor accident commission, which could raise $1.5 billion.

Local funds such as IFM Investors and Hastings have been key players in some recent deals, such as the sale of NSW ports, but foreign investors such as China Merchants and Tawreed Investments, an Abu Dhabi fund, have also been involved.

Australia’s consul-general in New York, former finance minister Nick Minchin, will host a reception for Mr Hockey on Tuesday night.

Separate meetings are scheduled with three of the most senior bankers on Wall Street: Citigroup chief Michael Corbat, Morgan Stanley chief James Gorman and JPMorgan Chase chief Jamie Dimon.

Mr Hockey will also speak to William Dudley, president of the Federal Reserve Bank of New York, and the former New York mayor Michael Bloomberg.

A meeting is also scheduled with Rupert Murdoch, chairman of News Corporation, the publisher of The Australian.

The last G20 finance summit, held in Cairns last month, formally backed an “infrastructure initiative” to get member states to use large public works to spur economic demand, but the details are yet to be finalised.

Australia is pushing for an “infrastructure centre”, which it would host as a way of sharing lessons between member nations about luring private capital into new projects.

The International Monetary Fund lent support to the G20 agenda in recent days by releasing a detailed analysis of the scope for infrastructure finance to lift global growth, recommending countries act to approve construction.

“The domestic agenda of growth and jobs is the same agenda we’re taking globally,” Mr Hockey said.

“We’ve got to marry together private sector investment with public sector facilitation.

“This trip is all about how do we bring together a more ambitious private sector with a more needy public sector in Australia and around the world.”

Stronger infrastructure investment is one of the ingredients in Mr Hockey’s plan, as host of the G20 finance summits this year, to add 2 percentage points to global growth over the next five years when compared with a “business as usual” scenario without change.

“Governments are running out of money, central banks only have marginal capacity to stimulate monetary policy,” Mr Hockey said.

“It is only through structural ­reform, and closer partnership ­between the private sector and the public sector, that we’re going to be able to deliver the new age drivers of growth.”